Fund income question

d712

Hello

A couple of days ago I noticed that I had received some ‘income’ from the the Vanguard LifeStrategy 100% Equity Accumulation fund I had invested in.

However this appeared in the statement as the COST of the fund having GONE DOWN rather than the value of the fund going up.

How does this benefit me? Isn’t it like saying I paid less for it than I actually did?

As the value of the fund hasn’t changed then it won’t affect what I sell it for.

Sorry if I've completely misunderstood what's going on but I’m just confused by this.

ColdIron

It sounds like an equalisation payment, have a read of this thread, particularly #8

https://forums.moneysavingexpert.com/discussion/5848032/help-understanding-equalisation-units-accumulation-distrubution

Asghar

d712 wrote: »

However this appeared in the statement as the COST of the fund having GONE DOWN rather than the value of the fund going up.

Which platform are you using?

londoninvestor

Asghar wrote: »

Which platform are you using?

I know HL does this - to my irritation. They do it correctly for income funds - i.e. decrease the cost by the amount of the equalisation received, and ignore the dividend.

The problem is they then apply exactly the same method to accumulation funds, which doesn't make sense. For an acc fund, you need to increase the cost by the dividend, and ignore the equalisation.


Ultimately the end of tax year statement from HL does have all the information you need to do the right calculation, but the way the costs show on your day to day account view is confusing.

grey_gym_sock

londoninvestor wrote: »

I know HL does this - to my irritation. They do it correctly for income funds - i.e. decrease the cost by the amount of the equalisation received, and ignore the dividend.

The problem is they then apply exactly the same method to accumulation funds, which doesn't make sense. For an acc fund, you need to increase the cost by the dividend, and ignore the equalisation.

to follow this logic through, for accumulation units, they should increase the cost by every dividend received while the units are held, not just for the first dividend payment. then the gain/loss would show the capital return correctly.

at any rate, that is one view of the return of each holding that i'd like to see. a choice of different views would be necessary to cover the different ways i might want to look at it for different purposes. not to mention what others investors might like to see ...

i doubt if any platform does all that ...

londoninvestor

grey_gym_sock wrote: »

to follow this logic through, for accumulation units, they should increase the cost by every dividend received while the units are held, not just for the first dividend payment. then the gain/loss would show the capital return correctly.

Oh yes, totally. And agreed that there are different views. I think you can argue for the following:

• "full economic P&L" where the cost for income funds is (cash paid for units)-(dividends received)-(equalisation received). And the cost for accumulation funds is just the cash paid for the units.
• "unrealised P&L" where the cost is just the cash paid for the units. (In this view, you don't want to account for the dividends and equalisation received, because you've got them in your cash account.)

What HL does for acc funds isn't either of them though! It seems like it tries to give the right cost for CGT, but wrongly just transposes an income fund methodology to acc funds.